Universities are key players in the successful transition to a knowledge-based economy and society. However, this crucial sector of society needs restructuring if Europe is not to lose out in the global competition in education, research and innovation. To allow a more evidence based process of reforms of higher education, this contribution reviews the trends in performance, funding and governance of European universities. It also brings on board some evidence on support for the reform process. The analysis shows that, while EU universities have improved their quantitative performance on teaching and research, it needs to further improve especially on the quality dimension. The link between governance, funding and performance is not obvious and needs still further data and research. Nevertheless, the preliminary evidence so far seems to suggest that society supports a multitude of university structures, to respond to a heterogeneous set of preferences. This calls for granting universities the space and thrust to develop autonomously their own strategies and structures. Public and private stakeholders should provide the funds for universities to develop their agenda, while holding them accountability for delivering results. Establishing a large, integrated market for higher education and research in Europe, would provide an environment for European universities to develop their comparative advantages, making them stronger players on the world scene.